On September 7, the CFPB issued a Notice of Proposed Rulemaking regarding Dodd Frank Section 1071. This provision of the Dodd-Frank Act will require that financial services providers making loans to small businesses, women-owned businesses, and minority-owned businesses collect and report HMDA-like data points to the CFPB. The Bureau, in turn, will make some of this data publicly available. Section 1071 will present substantial compliance challenges and will create new sources of risk for financial services institutions offering small business and commercial credit products.
On Wednesday, September 8, Bradley attorneys Christopher Friedman and Brian Epling hosted a webinar in which they outlined the contours of the proposed rule (including exemptions), present initial reactions, and discussed ways in which financial services providers can start working to prepare for this significant new regulatory regime.
- Section 1071 broadly captures most financial institutions offering financing to small businesses.
- The 18-month compliance deadline significantly reduces the ramp-up period for compliance with the rule.
- The HMDA-like requirement will likely result in substantial compliance challenges for commercial lenders and finance companies that have historically not faced significant regulatory oversight.
- The breadth of Section 1071 will impact finance companies differently based on the size of the finance company, customer base, and previous compliance experience.